NGOs fight legacy of manipulation and damage
The Anglo American Corporation (Anglo) has been mining in Zambia for almost 70
years. Now the company wants to leave the country without cleaning up the
environmental problems created during its long history of open-pit and
underground mining there. This is especially vexing to Zambians aware of the
extravagant concessions Anglo received from the Zambian government. Anger and
frustration over Anglo's history of manipulation and irresponsibility has led
NGOs to take their case against Anglo to the United Nations and the Organization
for Economic Cooperation and Development (OECD).
A long and dirty history
One of the oldest mining companies in Zambia, Anglo was the owner of Nchanga
Consolidated Mines (NCM) before the mines were nationalized during the 1970s.
After nationalization, the Zambian government acquired 51 per cent of NCM
shares, and Anglo retained 49 percent.
Prior to the privatisation of Zambian mines in 2000, Anglo also retained partial
ownership of Zambia Consolidated Copper Mines (ZCCM), the entity owning all the
nation's copper mines. The smallest share that Anglo ever retained in ZCCM was
27 percent, held through Anglo's Zambia Copper Investments (ZCI).
Then in 2000, the highly controversial privatisation process of the copper mines
led to the formation of Konkola Copper Mines (KCM) as a ZCI subsidiary. After
privatisation, Anglo had a 51 percent share interest in ZCI and market investors
retained the remaining 49 percent. Anglo has a 65 percent share interest in KCM,
the Zambian government 20 percent, and the International Finance Corporation (IFC)
and Commonwealth Development Corporation (CDC) 7.5 percent shares each.
Abuse of power
When Zambia's copper mines were privatized in 2000, Anglo abused its dominant
position as a Zambia Consolidated Copper Mines (ZCCM) board member to obtain
secretive, so-called "Development Agreements." These legally-binding agreements
between Anglo and the government granted excessive concessions to the company in
terms of taxation, royalty payments and repatriation of profits. They ensured
that any liability for redundancy payments, ZCCM debts, and past and future
shouldered by ZCCM and the Zambian government.
The Government agreements with Anglo weakened environmental protection laws. But
they also provided Anglo with even greater protection by exempting the company
from liability for fines, penalties or third party claims against past
activities of ZCCM or present activities of Anglo. The company obtained legal
immunity or indemnity for 20 years - the mines' anticipated lifespan. Yet Anglo,
as a shareholder in the past, as well as the newly-privatized 2CCM, should have
been forced to assume responsibility for its own share of liabilities.
Anglo thus manipulated its dealings with the Zambian government to ensure that
affected communities would be harmless, hopeless and helpless for as long as the
company operated in Zambia.
The exclusive concessions granted to Anglo would have been unacceptable to the
Zambian people. The results of these secret negotiations were not made public
even after the sale was concluded.
NGOs take fight for Zambians' rights to UN
When civil society groups in Zambia and abroad learned of these concessions,
concern and anger led to action. Two Zambia-based NGOs, Citizens for a Better
Environment and the Inter Africa Network for Human Rights (Afronet) Joined
forces with the UK-based Rights and Accountability in Development. The three
groups submitted a corn plaint to the UN Committee on Economic, Social and
Cultural Rights in Geneva, demanding an investigation into the role the Zambian
government and multinational companies played to deny Zambians these same
rights, as well as their right to a clean environment.
Anglo conduct violates OECD requirements
The three NGOs also made a submission against Anglo to the UK Department of
contact point for the OECD, The submission details how Angle's actions and
influence during the sale of government-owned ZCCM created Zambians fundamental
human rights.
Many aspects of Angle's conduct are in concern was Angle's private influence of
government to ensure social deregulation of local communities.
Details of manipulation and influence
During a public consultation and disclosure process in 1999, Angle used
unreasonable influence to ensure that key documents and information, including
the development agreements, were kept from public scrutiny.
But Anglo also used its influence as dominant shareholder and member of the
Board of Directors of ZCCM in numerous other ways. Angle's influence led to the
rejection of a government-hired consultants' report giving advice about the best
mode of privatization for the group of state mines. The consultants advised the
government against selling the mines to a single company. Rather they
recommended unbundling the mines and selling them as several individual units,
to encourage competition and avoid
monopolistic tendencies. However, Anglo's use of its dominant position to reject
the consultants' report led to an unreasonable delay of the mines' deteriorated
and led the government to lose close to US$1 billion.
Frustrating other buyers
Anglo also used its position to negotiate the exclusive right to purchase and
develop the Konkola Deep Mine, and to do so only after other major mine sales
were concluded. This mine was the gem that all other buyers were eyeing, and its
exclusion made the sale of the other mines unattractive.
Anglo further manipulated the removal of the Mufulira smelter from a larger
Nkana mine sale package. The smelter's removal made the package unattractive;
bidders found it odd to purchase a mine without a smelter. Furthermore, Anglo's
dubious acquisition of the management contract of these facilities, and its
right of first refusal to buy and/or veto other potential purchasers, made the
sale of other Nkana mine assets extremely difficult, Anglo also pressured the
Zambian government to lend it US$80 million to rehabilitate the Mufulira smelter
and refinery; the company was then offered the same facilities for purchase when
all assets were on sale on an "as-is basis."
Anglo's unreasonable conduct in these cases violates OECO competition
guidelines, which state that companies adversely affect competition in the
relevant market by abusing a dominant position of market power, by means of for
example: a) Anti-competitive acquisitions;...c) Unreasonable refusal to deal..."
(OECD Guidelines for Multilateral Enterprises).
Unfairly eliminating competition
Anglo's goal to be the sole contender for the mines' purchase exerted a very
unhealthy influence on the sale process. Anglo retained the right of its
directors on the ZCCM board to vote on the final acceptance or rejection of each
winning bid, which made the sale of mines extremely difficult. Credible mining
houses, including Noranda, Phelps Dodge and AVMIN had formed a consortium to
purchase the mines, and offered a very lucrative package to the government.
However, Anglo used its voting power to deliberately frustrate the sale to this
dissolution of the consortium.
Tax concessions accorded to Anglo and its majority-owned KCM during the ZCCM
privatization were a source of concern to OECD guidelines which state that or
accepting exemptions not contemplated in the statutory or regulatory framework
related to environmental, health, safety, labour, taxation, financial
incentives, other issues."
IMF directors expressed their concern over the generosity of the tax concessions
granted to Anglo. Both the Zambia Institute of Chartered Accountants and Price
Waterhouse Coopers criticized the exclusivity of Anglo's position that led to
its preferential treatment over other mining companies. And Meteorex and
Chambishi Metals criticized the discriminatory nature of mining industry that
the same conditions be applied across the board.
Environmental exemptions
Anglo also negotiated huge windows of environmental exemption in order to avoid
regulations. It is pertinent to note that Anglo had a 27 percent stake In ZCCM
through ZCI. To maintain that Anglo's majority-owned ZCI subsidiary, KCM, should
be absolved from immediate responsibility for past damage and pollution caused
through ZCCM is unjustifiable. It is also unfair that Non Ferrous Corporation
Africa, a company with no historical interest in ZCCM, should inherit all the
responsibility for licence area.
Premature departure
Now, barely two years after purchasing the mines, Anglo has announced that it is
prematurely pulling out of ZCI. This is being done without due consultation with
other shareholders and stakeholders.
Anglo has not developed any premature closure plans. Most distressing of all,
the company wants to leave the country without clearing the environmental
liabilities that are its responsibility for its 70 years of mining in Zambia.
Anglo must be caught!
Anglo must not be allowed to run away from its present and past
responsibilities. Join the struggle of Citizens for a Better Environment and
other NGOs and help us make Anglo accountable to the people of Zambia.
This article first appeared in the June 2002 edition of Link Magazine. Article
by Peter Sinkamba, Citizens for a Better Environment, Zambia.
Note: We are not sure what the outcome of Peter's protest was. However, we
know that in follow up articles Zambia demanded exit money from Anglo. What the
outcome of that was is also not clear at the moment.
After having read this, will you vote for Anglo?
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